How B&Bs Can Help Save Britain

VAT rates throttle UK B&Bs

“Any ful kno” (as Nigel Molesworth used to say) that one of the most effective ways to get an economy out of a slump is to boost exports. One way to do this is to devalue your currency and make exports cheaper (exactly what Greece, Spain etc can’t do right now). But another way is to avoid taxing the hell out of the revenues generated by whatever it is you’re exporting – regardless of whether it’s a product, or, in the case of B&Bs, a service. High taxes on UK accommodation stifle the recovery, pure and simple.

Right now, bed and breakfast owners have a rare chance to help the country in terms of both exports and domestic consumption. Staying in a B&B – especially a rural one – is often one of the most delightful experiences for visitors to the UK: it gives them an invaluable chance to experience domestic life in another country without sacrificing anything in the way of comfort and modern amenities. B&Bs are also a crucial generator of jobs and GDP in the local economies that we so desperately need to stimulate (in order to stop the UK becoming, business-wise, “London… and everywhere else.”)

So… B&Bs can help to grow exports, create jobs, boost rural GDP and enhance our reputation abroad by offering foreign guests great experiences: a quadruple benefit. Given these facts, you would imagine the UK government would be falling over itself to help independent accommodation providers. But, oddly enough, it doesn’t quite seem to work out that way. The table below shows data extracted from the World Economic Forum’s “Travel & Tourism Competitiveness Report 2013”. This is how European countries pan out in terms of their Standard VAT rate vs their Accommodation VAT rate (click for a larger version)…

As you can see, the UK effectively has the equal third highest VAT rate on accommodation in Europe, tied with Slovakia. Indeed, of 27 EU countries, the UK is one of only four that charge the full rate of VAT on tourism accommodation. The countries we might regard as our principal competitors do far more to help their hotel & B&B owners. France’s rate is 7%, Germany’s is 7%, Italy’s is 10% and Ireland’s is 9%. Every single one of them enjoys an advantage against us. I know we’ve devalued the Pound a lot recently, but the Euro isn’t that strong a currency these days either. (The average VAT rate for accommodation throughout all other European countries, incidentally, is 10.5%).

The world of international trade is heavily regulated, so it’s very rare to have a sector where a government has the power to legitimately favour its local business. This is one of them and it seems to me that every other government knows it. So why doesn’t the UK’s? I suggest they look at our competitors and emulate them as quickly as possible. That would be something to really help the export-led recovery we all need.